Austin Real Estate Blog

Austin Investors Interests LLC, a local group that monitors the market in Austin, has projected a slowdown in apartment rentals within the first two quarters of next year. There are more than 12,000 apartments expected to be built during that time. During this last quarter, more than 2,500 were added to the market. These complexes will be in and around downtown, making them convenient to work and shopping. Occupancy has declined, and with so many new options coming up, the study projects it will continue.

The previous quarter shows an occupancy drop of 94.1% to 91.4% from the same quarter last year. Since the quarter includes the months of August and September when many college students are returning to the area, the drop has caused some concern. Many property managers are adding incentives to rentals in the area, including free rent and possibly discounts. Some are offering extended leasing options to reduce the rate of move outs during the year. The average rental is currently $821 a month. With the housing market as it is, many homeowners are choosing to rent their home as opposed to selling, which has also helped add to the slowdown for apartments. Some feel that metro Austin is setting itself up for an immediate downturn in occupancy rate and predict an overall decrease in rent of 3-5%. The job market here has remained steady, but still slow, which will also affect the rates. The next twelve months will be tight in Austin as the city works to fill all the new apartments.

One Austin are company believes that there is a great stake to be had with campus local properties.

Student housing on college campuses may become the real estate deal of the year. American Campus Communities, Inc has been developing student dorms and campus apartments since 1996. The company went public in 2004, and the website states it has developed over $1 billion in this specific housing. The company, based in Austin, has built housing at Arizona State University and near Texas A&M, among others. The company is well known for their quality work and building owners can usually expect to increase rent prices once updates are complete.

The most recent transaction of American Campus Communities, Inc is the acquisition of GMH Communities Trust student housing division. This $1.4 billion buyout was completed in June and has hindered some of the buying company’s revenue. American Campus Communities reports quarter increases of 30%. Occupancy has increased and rent has also gone up over the last few quarters. Though the GMH portfolio was a bit weaker than ACC, the company expects that this new deal will serve to continue the steady increases across the board. “While we inherited the GMH portfolio with leasing status approximately 5 percent behind last year’s pace, we believe that given our track record for integration and execution, we can dramatically impact value with the commencement of leasing activities for the 2009-2010 academic year beginning Q4 of this year,” American Campus CEO Bill Bayless says.

With the addition of the GMH portfolio, American Campus Communities now has 88 student housing properties with more than 54,000 beds nationwide. The company will continue to improve on existing properties and increase revenue throughout the next quarter as well.

With the recent purchase of the nine apartment buildings from Equity Residential, Northland Investment Corporation became the top owner of multifamily housing in the Austin area. According to this article in the Statesman, Northland bought the complex from Equity Residential for $270 million and, with this sale, Equity leaves the Austin market for what they perceive to be greener pastures on the east and west coasts.

The nine apartment complexes comprise a total of 2,985 units and are scattered about the northern and southwestern areas of the Austin region. Included are Madison at Stone Creek, Madison at Wells Branch, Madison at the Arboretum, Village Oaks, Arboretum at Stonelake, Madison at Walnut Creek, Madison at Scofield Farms, Sedona Springs, and River Stone Ranch. Northland Investment, which is based in Massachusetts, was attracted to the Austin market by encouraging job and population growth rates, and the growing high tech industry in the area.

Equity cites their strategy of a focus on long term ownership and higher growth in markets where the supply of housing is limited and feel the coasts offer this opportunity. It has been the contention among many experts that the Austin area has already become overbuilt with multifamily housing and that this will drive down rents and occupancy rates.

Local market analysts have pined the apartment occupancy rate to 93.4 percent in June 2008. This rate is down only slightly from the same time the previous year. During this period rental rates have continued to rise, albeit slowly. Real Estate experts predict occupancy rates will continue to fall steadily through the end of 2008, however with new construction slowing, most believe the decline will stop over the next year. This is anticipated to put the multifamily housing market into a positive bracket again.

Despite the rise in office and apartment vacancies in the city of Austin, the retail sector is staying strong. About two and a half million square feet of retail space was added in the first half of 2008 and the occupancy rate rose slightly from 92 percent to 92.5 percent. This makes Austin number one in occupancy rate among the large Texas cities. San Antonio boasts an occupancy rate of 91 percent, while the Dallas/Fort Worth area checks in with an occupancy rate of 89.3 and Houston is at 88 percent.

The good retail news can be attributed to the influx of a throng of retail concerns - REI, Staples, Office Depot, among others - into the Austin area and filling the new space. Existing space, abandoned by big box stores such as Albertsons, is being subdivided and backfilled by a number of smaller stores.

The high occupancy rate can also be attributed to the fact that developers and construction companies have slowed new construction in response to the slower economy. Austin continues to grow in population and add jobs, though at a slower rate than previously. Experts predict a slow down in new construction in 2009.

Meanwhile, a few big projects are slated to open this year: Stone Hill Town Center in Pflugerville, Stone Creek Crossing in San Marcos, and Gateway in Leander. All these large developments are anchored by big box stores such as Home Depot, JC Penney, Best Buy, Target, Lowes and Kohls, with smaller stores filling in.

Construction began in February 2008 on two luxury apartment complexes in the North Austin area, both constructed by the Texas division of Alliance Residential Company: Alliance Communities. Broadstone Travesia will be a 396 unit, built next to Travesia Corporate Park and Broadstone Grand Avenue, a 280 unit complex, will be build near Round Rock on the Grand Avenue Parkway.

The Travesia complex is scheduled for completion by mid-2009. Rents on the one-, two-, and three-bedroom apartments will range from $785 to $1,465 per month. It will be located across from La Frontera, a mixed-use development containing retail and office space, residential areas, and financial institutions.

The Grand Avenue project is also expected to be completed in 2009, offering one-, two-, and three-bedroom units ranging in rent from $760 to $1,430 per month. The apartment complex will be located at the northeast area where Grand Avenue and Interstate Highway 35 intersect.

Construction financing for the Travesia apartments is being provided by Guaranty Bank, while Bank of America is providing the financing for the Grand Avenue project.

This new construction is indicative of the Austin area’s healthy and growing economy. Austin continues to attract major corporations to locate their headquarters in the area, and has been a leader in a new growth industry - “green” jobs and construction. As concerns over global climate change and warming grow, Austin stands ready to answer with alternative energy sources and sustainable landscaping, reusing waste water to irrigate lawns and plantings, designing new buildings with existing energy sources - natural sunlight and warmth, as well as cooling - in mind.

The new apartment complexes will provide housing for an expected influx of workers in the north Austin area.

If you are renting solely so that you can save money before buying a home, renter’s insurance may seem like an unnecessary expense. It may seem like an extra that while nice to have, you can’t afford. The truth is the opposite. You can’t afford not to have renter’s insurance.

If the worst should happen - a natural disaster, robbery - renter’s insurance will cover the cost of your possessions. You won’t be forced to start from scratch, which will automatically save you money. Should such a disaster destroy your rented home, many policies will pay for a temporary place to stay. Moreover, if an outside party is injured in your home, the liability coverage in your policy will protect you. You won’t have to worry about losing a sizable chunk of your income or savings. Your ability to buy a home will remain in tact regardless of the unforeseen.

When you start looking for renter’s insurance, which is what you should do immediately, don’t settle for the first policy you find. Be aware that you have options. You can get an “Actual Cash Value” policy, which will pay for the replacement of your possessions minus a small deduction, or a “Replacement Cost” policy, which completely pays to replace your items. Neither choice will extend by your policy’s limit, however. Therefore, you can get floaters. Floaters will extend the policy to cover particularly expensive items, such as jewelry, fur and computer equipment.

Whatever policy you opt to get, make sure it’s a good one. If you have shopped before settling you will know it is. Additionally know that the money you are paying now, is saving you money in the future.

While it’s still more desirable to purchase a home rather than rent, the rental market is very strong in Austin, which is good news for investors. Buying a home in Austin is still an excellent investment as properties in this area continue to appreciate.

As both a college town and one of the top 10 Tech cities in the nation (WIRED Magazine), Austin is a steadily growing city and property is in high demand. Rental properties remain a good investment for this reason, and for the fact that many investors fled the market, scared away by the bubble that hasn’t had a significant effect on Austin.

Austin is also home to some major industries - Dell, Whole Foods, South by Southwest - and new hires moving into the area are prime candidates for rentals before they make a more permanent home purchase.

As with most college towns, there is a constant stream of student looking for rentals. To the savvy investor and buying rental properties adjacent to the campus is almost never a losing proposition. The University of Texas in Austin is no different. Enrollment is rising and students are finding themselves competing for apartment space with non-students, such as retired professors and professionals who find the area near campus a desirable location for the access to cultural and educational venues.

Median rents fell by about 3 percent, from $936 to $907 per month in 2007. As lower house prices create a buyer’s market, the lower rents favor a tenant’s market. Also, with housing staying on the market longer, sellers are renting out their properties rather than carry the mortgage on an empty house.

Whether selling, buying, or renting, the current market in Austin remains strong, competitive and steady for owners, sellers, and tenants.

As Texas is a non-disclosure state, I’ve never liked Zillow. People who think Realtors do nothing, but schmooze and collect paychecks love Zillow, because they feel it empowers them to do their own home sale. In reality, since non-disclosure states do not disclose all sales prices, Zillow often gives poor data because (1) it only has sparse data to give and (2) a computer program is never going to be able to select comparable sales as well as a human who can go and physically view the property and adjust subjectively. So basically, Zillow, while it may be fun, is completely unreliable here in Texas.

But what about Zilpy? It’s a terrible name, but I thought I’d check it out. I compared the data provided by Zilpy for three apartments and condos that I know the rental rate and occupancy for in Austin to gauge the usefulness and accuracy. It was remarkably accurate for all the places that I checked. Granted, the site doesn’t appear to delineate by class of dwelling, but the ranges it gives help make it seem more accurate.

If you have a rental, check it out and let me know what you think. I’d love to hear from you.

Excerpt from Inman News.

Zilpy, the new ‘Z’ site in online real estate

Web site offers rental price estimates

Thursday, February 07, 2008

Inman News

Zilpy is like Zillow for rental properties, with rental price estimates, demographic data and heat maps based on median rental rates.

The new Web site, which launched last week and lists Zillow as a partner company, offers competition to Rentometer.com, another site that allows users to gauge rental prices in a selected area.

Zilpy.com is not a rental listings site. It is a rental research site that allows users to grab automated rental price estimates by address, city or ZIP code, and to refine searches based on type of rental property, a desired rental range, number of bedrooms and a range of square feet. One of the founders referred to the site as “the Trulia for the rental market.”

The heat maps show areas with higher and lower rental prices — red zones feature the highest median rental prices, while dark green shading indicates the lowest rental pricing.

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Screen shots from Zilpy.com